This week in ... Investing
Tech Week Review 23/2022
The big question in the room mid-2022:
Are we heading towards an economic meltdown?
Although the big institutions still say that the economy is on an upward trajectory and try giving a positive outlook, there are already other voices in the room that warn before an upcoming recession.
What are the current action plans?
Klarna takes a down-round
The company is the rising star of the Buy Now Pay Later movement. Klarna was founded in 2005 in Sweden and is Europe's most promising fintech.
Last year in June, the board nailed a funding round led by Softbank at a valuation of 45.6 billion dollars.
The company was set up for growth at any price, which resulted in growing revenues and, at the same time, growing losses.
Since such models burn through the cash position quickly, Klarna started raising funds to keep the model going.
According to Wall Street Journal:
The Sweden-based payments company is aiming to raise up to $1 billion from new and existing investors in a deal that could value it in the low $30-billion-range after the money is injected, the people said. That would represent a roughly 30% drop from the previous round.
In January, they started talking with investors demanding a valuation of over 50 billion dollars, which doesn't seem feasible given the current market conditions.
Since interest rates are rising, the war in Ukraine is ongoing, and supply chains are heavily disrupted, I wonder how long it will be possible for companies like Klarna to raise capital for cash-burning business models.
Tesla cuts back on Jobs.
Lately, Elon Musk has been a frequent visitor in news headlines.
First, his ambition was to acquire Twitter to become the savior of free speech and western democracy.
Then he decided to remind his employees that only hard work leads to success and demanded that his executive is in the office for a minimum of 40 hours. For some on the Internet, a terrifying perspective.
And now this:
Elon Musk wants to cut 10% of Tesla's jobs since he believes in an economic downturn. Smart move. Usually, after such emails, some people leave the company out of their free will.
Re-Wired — How the world changed
While surfing the Internet, I was a bit nostalgic since I found a video of Bill Gates explaining the beginning of the Internet to David Letterman.
I came across an article on wired, published in 1997. The writers tried to predict the future.
1997 was the year when the Internet started taking off. Amazon was winning and copied by many companies. Microsoft gained market share with Internet Explorer, and Steve Jobs returned to Apple and started creating the huge success that made it the most valuable company in 2022.
Here is the article worth reading:
And here is the print issue, p. 135:
Sequoia's Dooms Day Warnings
Sequoia is one of the world's most significant funds. They invested in companies like
Palo Alto Networks
The fund started in 1972 and is celebrating its 50th anniversary. Those guys know what they talk about regarding the state of the economy and its effects on their portfolio companies.
Here are the four letters from Sequoia in which they recommend actions to their C.E.O.s:
2022 — Adapting to Endure:
And here is the pdf: Link
2022 — The Black Swan
2008 — R.I.P. Good Times
2000 — Dot.com Bubble Burst
I hope you enjoyed the review. See you next week.
August 19, 10:00 am CET - Tobias Silberzahn, McKinsey - tbd
2 Podcasts from this week:
1 Youtube Takeaway from this week
Books I am reading this week
From legendary investor Ray Dalio, author of the international bestseller Principles, who has spent half a century studying global economies and markets, Principles for Dealing with the Changing World Order examines history's most turbulent economic and political periods to reveal why the times ahead will likely be radically different from those we've experienced in our lifetimes - but similar to those that have happened many times before.
A few years ago, Ray Dalio noticed a confluence of political and economic conditions he hadn't encountered before. They included huge debts and zero or near-zero interest rates that led to massive printing of money in the world's three major reserve currencies; big political and social conflicts within countries, especially the US, due to the largest wealth, political and values disparities in more than 100 years; and the rising of a world power (China) to challenge the existing world power (US) and the existing world order. The last time that this confluence occurred was between 1930 and 1945. This realisation sent Dalio on a search for the repeating patterns and cause/effect relationships underlying all major changes in wealth and power over the last 500 years.
In this remarkable and timely addition to his Principles series, Dalio brings readers along for his study of the major empires - including the Dutch, the British and the American - putting into perspective the 'Big Cycle' that has driven the successes and failures of all the world's major countries throughout history.
Dalio reveals the timeless and universal forces behind these shifts and uses them to look into the future, offering practical principles for positioning oneself for what's ahead.
Best Quote From This Week
“Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.” – Oprah Winfrey
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